Tuition insurance and protecting your college investment

The Dirty Secret About College Refunds No One Talks About


Tuition Refund Insurance | protecting your educational investment

One of the dirty little secrets about college tuition and paying for college, is the fact that the entire experience is not consumer friendly. In this country, we have lemon laws to protect us from bad cars, escrow to protect us in a home or major purchase, and most companies in the US make receiving a refund relatively easy.

Listen to the episode: [audio https://s3-us-west-1.amazonaws.com/cmmwordpress/Podcasts/episode32.mp3]

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But what happens when you can’t finish a semester in college due to illness or mental health episode? In this episode we talk about this fact, and how a major consumer purchase such as tuition can be insured for loss. We interview John Fees (@JohnFees) of NextGen Insurance (@NextGenIns) about Tuition Insurance, a form of coverage which can protect parents and their students should the unforeseen occur and they have to leave mid-semester. In addition we discuss how Homeowners Insurance does not alwaysProtecting your college tuition investment with tuition insurance cover the items college bound students may have stolen, damaged, or lost on campus such as laptops and textbooks and how Renters Insurance could help.

We also answer a listeners question about being required to refund financial that has been issued if they drop at the 50% mark. The Return of Title IV Funds, also known as R2T4, is an issue many face when they drop after having received financial aid. People rarely are told that if they drop they will have to refund the portion of financial aid that is not returned to the government.

 

Download The Episode: Ep32 April 2, 2014

TRANSCRIPT AFTER THE JUMP 


 

The following is a Partial Transcript of this episode

Jose “JR” Vazquez – This is episode 32 of the College Money Man Podcast

Today the dirty little secrets about college tuition that nobody wants to talk about

Its Wednesday so break it down for me one time DJ.

Announcer – It’s the collegemoneyman Podcast so we try to help your college ground student earn a debt free degree, And now your host he found over a quarter of a million dollars in scholarship and aid he never had to pay back, JR Vazquez

Jose “JR” Vazquez – Well it’s that time of year parents and college bound teams have made their selection they’ve pretty much decided where they want to go, they’ve got accepted they are finalizing the last bits of the financial aid and they are starting to create that little check list in there head. The ones that really plan this out have figured out what it is they need to take with them, what it is they need to find out about the campus, where all the great spots are what all the great clubs are, what the majors are and what classes they want to take next semester.

They are already enrolling into the process and they can’t wait, but in the midst of all this people lose sight of the fact that college is always a risky proposition, and what I mean by that is the high cost of tuition know matter where you go, not to mention the fact even with merit aid factored in many students and parents do have to either come out of pocket somewhat, or take out loans in order to finance a portion of or all of their education , but the question we are left with is, as any of the parents actually found out about what the refund policy is.

It’s a dirty little secret something we don’t want to talk about, in academia they like to think of themselves as above anything petty such as money and the payment of tuition, in fact the people that teach you are not the ones who actually deal with the financial aid or paying for the process and since they don’t pay for it it’s not something they really think about, but it’s something that parents have to think about, it’s something that college bound teams or none traditional students have to think about, its something that the rest of us have to think about, but academia tends not to, except when they are not in the ivory tower and down in the administration building.

They are thinking about it, and they’ve made their budget for the next year and they know what they are going to have to charge students, think about it the average college tuition for a state university as started to edge up towards 9 10,0000 in some places and some of the times as much as 12 but a private university can be as much as 2 to 3 times the amount of a state university depending on where you are going, the question we are left with is what happens if you need to get your money back? What happens if something goes wrong in the first second, third, fourth, fifth or God forbid close to the end of semester what happens if something goes wrong that semester.

What happens if the unforeseeable or the unthinkable occurs in your family or to yourself?, what are you supposed to do, we have appeals in order to get financial aid back in case something occurs, and we have academic appeals in case grades slip because of this, but one thing we don’t have or we don’t understand very well is what is the refund policy of the university? I mean think about it if you’re going to drop 10 grand don’t you want to know how to get your money back if things go wrong?, it’s not a question we ask frequently especially not of academia because sometimes we look at the transaction as we are so glad we were accepted in the first place we were willing to pay anything. Our kids are so excited oh great I get to go to my first choice school, I get to go to my first pick or I get to go to the dream school that I’ve always wanted that as the perfect major the perfect student life, it as the apartment I’ve always wanted to live in or the residence hall life that I’ve really dreamed of, and I’ll finally be away from my parents.

Meanwhile Mom and Dad are the ones that have to help foot the bill, and that’s even with scholarship its very likely they have contributed something and what they don’t know is oh know what happens if something goes wrong, so as I was poking around the web this past month one of the things I came upon was the notion of student tuition insurance, or tuition refund insurance and I thought what a novel concept, so I dug a little deeper and I found originally on the site for college parents of America they are kind of a none profit umbrella group that its membership based that parents can join and now I decided to dig a little deeper and I got in touch with John Fees and John Fees is the presidency of Next Generation insurance and what they do is they specialize in this kind of insurance, in case something goes wrong God forbid and you have to drop the semester, what happens if you have a way to make sure your entire investment isn’t lost thousands of dollars gone to waist because you or your student had an incident that required them to come home.

And so I invited him to come on the show and if you join me(inaudible)

And joining us today via Skype is John Fees, now John Fees is cofounder and CEO of the Next Generation insurance group, how’s it going John

John T. Fees –  Terrific JR thanks for inviting me to be part of your podcast today

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Jose “JR” Vazquez – Thanks so much for coming on now I was combing around the web the other day and I had seen college parents of America and I had looked at it and one of the benefits that they offer for their members is the student protection plan and it offers next gen insurance for tuition, and tuition refund and it had never occurred to me, when you think about a purchase when it comes to private school that can be upwards of 30,000 dollars and for public school which is now 10 or 12 why don’t we why isn’t this thought of more often why hasn’t this been talked about in insuring such a huge purchase.

John:  Yeah it’s a great question and I was surprised to find it as well I went as my own personal experience kind of informed that, I went to Arizona state university as an undergraduate and they had never offered tuition insurance as an example, and yet then I went to graduate school with my wife in Boston in an elite private institution, and we had received a offer for tuition insurance. And I said to myself wow I didn’t understand that basically for many years if you attended an elite institution in this country you could protect the investment you made in your college education, and primarily its protecting it from unexpected events just like travel insurance, in that if you get sick or become ill a parent dies or even in the case of a tragedy where a student might die, the institutions don’t necessarily refund your money, sometimes they refund some portion of it but in many cases it’s not well disclosed to students, but in many cases the students actually suffer financial loss that can otherwise be protected through tuition insurance.

Jose “JR” Vazquez – You know it’s funny I have helped students before many times, they file for financial aid appeals or academic appeals to be readmitted to the institution, and you know 30 or some odd percent of the time you’ll notice that it wasn’t something you could control, they had no control over the circumstances what so ever.

John T. Fees –  I think that’s exactly right and I think your experiencing the financial office explains it a lot, basically students leave school at an alarming rate it’s a really it’s a shame I guess is the best way of saying it that really only 4 in 10 students that actually start will not graduate and so when we think about student loan default rates and the problems student borrowers are having out there, one of the single biggest reasons that they have a problem with paying their loans is they didn’t graduate, and if they didn’t graduate if you look at the real issues behind it many of them are insurable life events, a parent died you got sick you couldn’t complete the term you may or may not have completed a medical withdrawal which you would have been eligible for and if you had tuition insurance you would have actually been able to get a do over without any financial cost to you, and I think that’s really what we’ve tried to do and we started Grad Guard Next generation insurance group offers Grad Guard to College parents of America members, it includes 5000 dollars of tuition insurance with each membership but it’s also included as part of certain student loan programs other such as those that are offered by Sally May it’s also offered through other insurance companies, and I am a big believer that everybody needs some level of tuition insurance, but it doesn’t mean that you necessarily need to buy it, you may be able to get it with by attending certain schools that offer it to you, you may be able to get it when you get a student loan or when you get a different insurance product so we believe, yes it’s a good way to get, the best way to get insurance is when you’re buying something else.

Jose “JR” Vazquez – I guess the issue is I imagine that only a certain percent of the schools carry it even though all schools probably should carry this for their students.

John T. Fees – Yeah, I think there is too. I appreciate that approach. I think the public institutions in this country were not expensive 25 years ago, generally speaking. I paid $500 as semester day issue  the financial loss was not a burden to me. Today, Aissues over $20,000 for out of state students and over $10,000 for in state and that is now a burden that is very difficult to overcome a few loss that cost of college. And so today, I think every institution is expensive enough to warrant the availability of it. I think I find it ludicrous that you can ensure a $300 airline ticket, all right, and then that you’re absolutely required to say yes or no to US airways whether or not you want travel insurance for a relatively small purchase.

But when you make a large purchase such as paying tuition, you’re not given the opportunity to pay, know what the refund policies are. Sometimes schools don’t fully disclose them and B given the opportunity that investment from financial loss. There is no other investment that a family makes or that a consumer makes that is so large, that lacks the transparency of investing in a college education. I think that’s a big part of what conference of America does, so a big part of what grad guard seeks to do is  just allow students to be aware of the risk that they’re taking and how to protect that.

Jose “JR” Vazquez –  You make a good point with the airline tickets, but it’s the same thing with a 17-year-old that bought a 500-dollar beater car or a beat up vehicle –

John T. Fees – Yeah.

Jose “JR” Vazquez  – he can’t get out of the driveway without carrying liability insurance, that’s just the law.

John T. Fees – Yup.

 

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Jose “JR” Vazquez – And so it makes no sense for us to make such a large purchase and it seems almost like, I mean this is the same thing about cost comparison between schools how they don’t necessarily like that, how they don’t like to compare each other, due to cost because they feel the experience is different. They take an academic approach but the problem is they still want money. There’s still a business decision to be made, a hard cold financial decision that in the end you say, “I am willing to invest in my child for the next four years.” Upwards of this much money in their education and they’re willing to let it go and assume that everything will be fine.

John T. Fees – Yeah. And the reality is unfortunately, there are 20 million college students in the country and if you look at the trends, they – almost 2% of them will get monup. It is one of the most characterized illnesses that you’ll get. Mental illness is a – and anxiety and a number of illnesses are really a chronic problem now around the country and they are debilitating in such a way that tuition insurance is necessary. I think there are two points that are really useful especially for your listeners. One is because your expertise in financial aid is that I think that the terms and conditions of your investment in your college degree need to be fully disclosed. So it’s useful for every student and parent to ask: What is the refund policy in institution?

The second thing is so what happens in the case of an illness? And I think you ask the school that you’re choosing to enroll in what their refund policy is and then secondarily, if they offer tuition insurance. The only way to get tuition insurance is actually through your school or through College Parents of America or through a SMSLA loan or a couple other places like that. But the reality is most often, the best place to buy it will be through your school and the schools don’t make money from it. There’s not – it’s not like an extra fee that they’re making money from, it’s just an ability to protect an investment. Again, the important piece here is public school students have been pretty much unprotected and yet if you went to USC for instance, over 70% of students there enroll in tuition insurance, 70%.

I’ve been speaking with universities for a long time and some schools say well, “We just don’t need it.” Well, I find it surprising because they just haven’t asked the question. How many of the students that are withdrawing are withdrawing from legitimate medical reasons that would have otherwise been subject to benefiting from tuition insurance.

Jose “JR” Vazquez – It’s astounding that it seems like the public school students even nowadays where you have public schools that are – we used to think they were the cheapest option.

John T. Fees –  Yeah.

Jose “JR” Vazquez – And they’re not becoming that at this point. It seems like if you look at a resent study by collegeadvocate.com where they just compared three schools and the private schools tended to be the cheaper option than the public one and given that, they’re still behind the curve on this and it seems a lot of schools are.

John T. Fees –  Yeah. I think they might. Right. I think the value of your podcast and your book and other things you’re doing that you’re bringing attention to the questions that students in their family is need to be asking of the institutions. And College Parents of America did a survey of freshman parents, parents that had a freshman student, and two thirds of the parents had no idea how their school would handle a refund policy and less than a third recalled being told specifically about the schools refund policy. To me that’s the astonishing thing here. It’s – and I think the value of what you’re bringing to the table is helping students who are now consumers. This is a large consumer purchase going to college be better protected from the risks that may impact or disrupt their education.

Jose “JR” Vazquez – It’s one of the largest purchases they’re going to make in their life. They buy a house, they buy a car and then they have to buy their education.

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John T. Fees –  That’s exactly right and when given the opportunity to enroll in tuition insurance, I mentioned earlier University of Southern California where 70% of the people say yes. When given the opportunity, people will say, “Yes, I can’t afford.” You shouldn’t have buy insurance unless you can afford the loss, right? So when you need to buy insurance is when you will suffer the negative consequences if you cannot afford to replace what’s the financial loss is. So if you can afford the $10,000 loss, as a result of a medical withdrawal that may occur at the school, then you don’t need it. Then you don’t need tuition insurance. But the reality is I think most of us realize that’s so substantial that if its price affordably, it’s worth applying and include in the cost of education.

Jose “JR” Vazquez – So if you had to talk to parents and say, “Look, this is something you need.” What step – I mean, what are the three piece of advice you would give to a parent as they’re considering the college that they’re going to attend to approach this to make sure that they not only are aware, but they can try to take advantage of insurance opportunities if they’re available, if they’re not to request them.

John T. Fees – Yeah. I think there is too. So our mission is really to help families overcome any financial loss that would otherwise disrupt a student’s education. So our mission is about student success and about helping families and their students achieve their dream to have a college education and to preserve the investment or surrounding that. And I think the advice I have is really three-fold. One is ask the question of the institution: What is your refund policy? Secondly, ask the question: Do you refund our money if in the case of student withdrawal or medical withdrawal? And if not, do you offer tuition insurance?

Those two simple questions would go a long way to having institutions start to offer them. We’re talking to hundreds of institutions today, over a hundred institutions offer our products and tuitions insurance today which is a really important milestone for us but the reality is there are still millions of students that are unprotected because their institutions haven’t embraced offering these products. I’d say the third thing is that it’s overlooked but we asked parents also: What are the other issues that they’re particularly concerned about?

And actually the loss of a computer or damaged personal property is also one of those things that’s fairly traumatic in a young person’s life and so we also recommend as the third kind of you asked for three things, the third thing is to actually evaluate, can you replace your stolen bike or a stolen computer and if not, we recommend that young adults purchase renters insurance. Renters insurance is really an affordable way to basically replace products that are essential to your student life, your computer, right? Well, a parent may have homeowner insurance. But typically, homeowners insurance has a large deductible and most of the consumer electronics that these students have are kind of below that thousand dollar mark and yet, renters insurance basically fits that need and helps is a very practical way of helping students overcome the damage that comes dormitory fires, the financial loss that occurs as a result of thefts on campus and by the way, students are vulnerable.

They are amongst the most targeted segments because they’re preoccupied with other things. Their backpacks get stolen; over 70 backpacks were stolen at the campus during the first week of school last year in Kentucky, just like one example. For sure, that is thousands of dollars in each one of those backpacks and the schools don’t replace those and if you don’t have the wear with all or renters insurance for instance to help you replace it, you’re going to find yourself really with kind of an emergency situation that is unfortunate and frankly can disrupt your education.

Jose “JR” Vazquez – I know a kid who is in graduate school who had his computer and his books in the bag and the books combined were actually worth more than the computer in the long run.

John T. Fees – Absolutely.

Jose “JR” Vazquez – And losing all of that cost him a fortune.

John T. Fees – Yeah. The backpacks, I mean, it’s just amazing right and thefts, you steal somebody’s backpack, they can sell – the thief can sell those books, right? They can get money for those books and for the electronics.

Jose “JR” Vazquez – They sell quickly.

John:  And so it’s a serious issue and we try to bring attention to these issues not to create fear in parents or students because colleges were singly the best investment families can make, I think to improve their skills but it’s not at all cost issue. But all cost to for every degree. Each degree is worth slightly different amounts. But I think the important piece is that whatever you’re investing, deserves some level of protection that makes certain that you can as a family and a student can achieve your goal of graduating from college.

Jose “JR” Vazquez – John Fees, GradGuard, and Next Generation Insurance, thank you so much for taking the time to come on the show.

John T. Fees –  Thank you so much as well, JR. Congratulations on your success.

Jose “JR” Vazquez – Thank you very much and have a great day.

John T. Fees – You too.

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Jose “JR” Vazquez – John Fees, the president and founder and CEO of Next Generation Insurance which you can find at nextgenins.com and you can go to the website and learn more about GradGuard and student protection as well as other forms of protection for your college bound teen or for you if you’re in college right now. He brought up a really great – several great points. The fact that we insure very tiny little purchases in this country, but something so big as the things that we possess while we’re in college, laptops, textbooks, our tuition, we don’t insure those things and because they’re not insured were at risk and many students can’t handle the loss that would arise if their books and their laptop were stolen. That could disrupt an entire semester.

It could destroy grades, it could kill scholarships, it could destroy eligibility that one event and we’re not protecting ourselves because we think it’s a beautiful ivory tower world when in fact, it is a hard core consumer decision. You’re picking a life. You’re deciding how to start your adult life or your college bound teen’s adult life and we’re not protecting it. We’re letting them go out there with no parachute, no bungee cord, nothing, no protection whatsoever. So start researching your options. Go and talk to your college, ask them honestly about their refund program, ask them about what protection they have when they’re in the dorms and see if they’re able to take care of your needs should something go wrong for your student. I’ve placed links to Next Gen Insurance and several other articles about insurance and renters insurance for college students on my website, collegemoneyman.com.

So this week, I found the question that was really apropos to what we’re talking about here. Now, the person asks, “I have a college tuition withdrawal refund question. I want to withdraw from all my classes this semester. This week it is at the 50% refund point. My question is: If tuition was paid for by the Pell Grant and I withdraw, will Pell pay the non-refundable amount or will I be billed for it?” So to answer that usually from what I remember and understand is you’re going to owe them 50% of the money they gave you. Part of that is going to be refunded back to Pell, it’s not going to come back to you but because you did not finish the semester in earnest, if you would actually complete the semester, if you complete the semester and just don’t do well, well the financial aid will cover it.

But if you withdraw halfway through, you’re going owe that 50% back and here’s the rub on that. You’re going to owe the school or you’re going to owe the Federal Government and one way or another they will find the way to get that money back. So I strongly suggest you think about why you’re going to withdraw and if it may not be better off to just finish the semester out, complete the semester, do the best you can as opposed to owing the money down the line especially if you’re not going to have it. So consider finishing it off. You know I always tell people, after you’ve searched locally and after you’ve searched online using search engines, one of the next things to do is to start digging around at random in different companies websites and what I mean is think of the big corporations, work your way down.

There is nothing wrong with that. McDonalds, Hearty’s, Burger King, all of those and this week we have one from Discover, you know that card that pays you back, great little logo or whatever. They’re not sponsoring this so don’t worry. The Discover Scholarship Award, they’re doling out 40 grand in thousand-dollar increments to 40 different students this year. So the deadline on that is April 15, go ahead it’s a brief registration, sign up and you’ve got nothing to lose and everything to gain. Get your yourself over there. I’ve got a link to it in my website, collegemoneyman.com.

Jose “JR” Vazquez – Well, that’s our show for this week. Tune in next week as we answer more listeners’ questions and we talk about more topics in scholarships and financial aid. Until next week, this is JR Vasquez, the College Money Man wishing you good hunting.

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